Thursday, July 30, 2009

Today you may notice that the market indexes are up by about 1.5% so far this morning. This, despite a poor earnings report by Exxon-Mobil and a report that new unemployment claims rose by 25K rather than "only" the 16K economists expected. I quote:

"Investors also welcomed a weekly unemployment report that showed the number of Americans continuing to collect unemployment benefits unexpectedly fell last week to 6.2 million. Economists polled by Thomson Reuters had expected that figure to rise to 6.3 million from 6.23 million last week."The number of new unemployment claims filed increased 25,000 to 584,000, more than expected, though the increase was mostly due to seasonal distortions. Economists were expecting a rise of 16,000."

The fall in those collecting unemplyment benefits may be due to the fact that states have limits on how long the enemployed can collect benefits, or the long lines that people are waiting in to sign up, or that for many their allowed time may be running out. Nevermind. It's all good in the stock market.

This may be a new lesson for me. I had previously thought, based on years of following it and investing in it, that the stock market followed a reasonable logic and that it wasn't almost entirely psychological. I am still not prepared to say the stock market is a complete ponzi scheme or nonsensical house of cards. But if stocks go up by, for example, 11% in a two-week period solely because of "better than expected" but still bad company earnings report, I will start saying that. If that's the case, and this continues, than Obama and the nutty liberals may have me as a sympathetic friend when they go to regulate this house of cards.

Wednesday, July 29, 2009

I just want to acknowledge that I have no clue why the stock market has risen by over 30% and is staying there since earlier in the year lows. I do understand the explanations given as I look into it. It's psychology and not logic. That only lasts so long. I understand why it went up in the first place. I just have no idea why it is persisting and has not yet come down from 9,000 for the Dow Jones. It should not be more than about 7,500 to 8,500 max within a few months. All of the indexes are clearly overvalued.

What mystifies me is that it should have came down earlier in the Summer. I still believe it will come down so that if you can get your money out of stocks and into bonds, now is the time to do so. Maybe transfer funds from stocks to fixed income funds within a 401K or something like that But, unless this market does go down, I may be terribly wrong. Only time will tell. There is no logical reason for the markets to be this high though.

Tuesday, July 28, 2009

I've said this to friends of mine very frequently. Iraq is hard, complicated, but it is potentially a democracy. Afghanistan is not.

As a person who is a supportive admirer of the U.S. military with a good idea of what they're capable of, I say, with all due respect, there is no way we can accomplish our objectives in Afghanistan. They are incredibly well trained and creative fighters with nothing to lose. The terrain is impossible to navigate for non-natives, which they use extremely effectively, since much of it is so rugged. And there is much of it since it is a huge country. Also, the customs are completely foreign comparable almost to nothing else in the world.

There are some people you just leave alone.

Iraq had a history and people who could adapt to modernity because they once were known as Babylon and had a great empire and great history. They are commercially savvy. I also believe Iran could turn around down the road. There's hope there. But Afghanistan is literally like taking a trip to a land out of Lord of the Rings.

I am not a person who is scared of adventure and risk provided there is a potential for reward and some geopolitical benefit that can be derived. But what's the point of going in to Afghanistan? What - Go git Osama? Please! Do they have oil? No. Are they in an important locale? No. Has any foreign Army ever won there? No. America needs to seriously think about what we're doing in Afghanistan.

It was announced that new home sales for June went up by 11%. Were it October, an 11% jump would be something. But May is a good time to do construction. Naturally, the media is excited regardless of the specifics.

My predictions, that I first made as early as January, are as follows:1. Unemployment will reach 12% by the end of 2010. I made this prediction thinking that with a normal president a recovery would be well under way already. With Obama, we have massive debt spending and delayed fiscal lags with the slow flow of stimulus. The fact of fiscal lags and that this would happen is standard econ textbook 101. No surprise with how it's working. The only surprise was that the "Stimulus" was attempted in the first place given that we learned this long ago. With a normal president we would have seen unemployment top out about now. But this guy is going to easily cause another 3% to 4% more because of the small business taxes on all the greedy millionaires to pay for healthcare, cap and trade, and other assorted nonsense. He is creating uncertainty as well by politicizing things. Banks aren't lending, and they're smart to some extent not do so. They're now accountable not only to their shareholders but to their new TARP government masters. You can't take risks in that environment.

2. Interest rates will probably rise modestly but not dramatically. This is actually a pretty good outcome of a situation where nobody consumes all the liquidity the Fed has pumped into the economy. The scale of the money they've pumped in has been dramatic and yet still no effect. That itself is remarkable given the sheer scale of what they've done to essentially print money and give banks the opportunity to borrow at 0% from the Fed and at 1 to 2% to their depositors. And yet they're still not lending. Again, you can't take risks with the kids in control.

3. Inflation. Similar to interest rates. It will probably stay tame. That's my bet for the same basic reasons I mentioned before.

I think the stock market will start to tank. I have no explanation for why the Dow average is at 9,000. I am mystified by it. If it stays even above 8,000 by the end of this year, I will be shocked. I will confess to being way off if that happens. But the current stock market level makes no sense. Will wait and see.

I think Obama's healthcare is not going to pass in its current form. He needed to get it done because his poll numbers are tanking as more people realize how his policies are ridonkulous and cartoonish. "Go into debt to prop up the economy" is, with all due respect to Keynes and Paul Krugman (who I don't really respect), not really an answer. Once the August and September unemployment number come out and we see another million jobs lost and the rate goes up to around 10%, his poll numbers will go further south and it will be that much harder to pass this nonsense.

We will see what happens. I think most of my cheerful predictions are on target. I don't want them to be. But I didn't vote for Obama. If you did, be happy because this is what you voted for. I hope your job isn't the one that's lost because your rich boss has to layoff people. View it as an opportunity to learn something.

Friday, July 24, 2009

Let's get this straight. If national healthcare passes we will actually cut down on government spending and the overall costs of providing healthcare will decline.

If this makes sense to you, you're probably not reading this blog. If this makes sense to you, you may be unable to read.

There may be a social welfare argument regarding giving the uninsured insurance and incurring higher costs to do so. That's a legitimate argument. I don't believe a government plan is the best alternative available to acheive that goal. But it's an argument. Where the president goes astray is when he argues that the costs will actually go down. This is a child's argument, suggesting that hard choices don't have to be made, that this works best from every angle. It doesn't. If you want to insure more people it will cost more. Is the social welfare benefit greater than the economic cost? You can argue for one or the other. But you can't suggest we can have it all. This is the immaturity that is so dangerous.

The idea that a massive government expansion into healthcare would actually result in smaller government and less costs in the aggregate is so offensive to one's intelligence that I fear this may indeed be the beginning of the end of this interesting Obama as president experiment. Cool only gets you so far. At some point you have to respect the people you represent as a leader and lay out the facts.

The basic argument is that this approach will achieve savings out of the wasteful spending in the current system and will increase "competition". These arguments are so obviously flawed that I find it sad that anybody could actually advocate these two things in public.

First, Government-run anything doesn't operate efficiently. The President gave an example of pediatricians ordering tonsilectomies for children, not because the children needed it, but because they could earn a fee for doing it was truly condescending. Yet, he still has the support of the AMA and doctors. I guess he can pee on them and they'd still think he was great. He's going to cut their salaries and now he accuses them of ordering tests to get some extra fees.

Second, there are about 1,700 different private health insurance plans in America ranging from large corporate insurers to self-employed to personal insurance companies. I guess now that we have 1,701 thanks to the addition of the government public option, we'll really have competition!

But who knows, this may still pass. Both the Senate and the House have huge majorities. Maybe we can have it all. Or maybe this will indeed be President Obama's Waterloo.

I posted earlier on this. It seems absurd that the 5700 hospitals would agree to cut revenue of about $3M annually to make a deal for the national healthcare. It is still absurd. But they have some reasons to do so. Not all of them are so noble...

Friday, July 17, 2009

"President Barack Obama's top economic adviser said the signs of improvement displayed by the banks would not have been possible without government infusions, guarantees and other programs provided by the government."There is no financial institution that would be reporting the kind of positive results that we have seen in the last quarter but for the extraordinary public support provided by the government," said Lawrence Summers, the director of the White House's National Economic Council."

Banks are currently borrowing from the Fed at 0% and from their savings and CD depositors at 1% to 2%. They lend at higher rates for mortgage, auto, and personal loans. It's a good environment for short term profits. But their borrowing costs won't stay that low forever.

I woke up in a happy mood today. Why? Because I thought that President Obama's policies are so disastrous they will put a final nail in the coffin of socialism. In the short term the pain will be excruciating. People will continue to lose jobs, homes, and struggle with the human emotions associated with such real pain.

Earlier this year I predicted a 12% unemployment rate by the end of 2010. I am beginning to think it could get even higher because of the President's cap and trade, healthcare, deficits, and taxes on job creators policies. If you pay attention to what economists say, you'll notice they keep pushing back their recovery predictions. Some said back in April and May that we'd be recovering about now. We're not. Now they say it will come in the Fall. Soon it will be next year. The point is that there is no reason to believe in an economic recovery given this toxic environment. The general public doesn't seem to realize that economic predictions beyond 3 to 6 months are worthless. You learn that in econometrics and forecasting classes. I'm not clear why they even offer up a prediction about 2010?

In the long term, these policies that we're seeing today will be used as part of the teaching in economics, political science, and other fields as an example of how not to conduct public policy. One of the reasons I am so shocked by the current policies is that I remember having the 1970's (and to a lesser extent the 1930's) used as an example of how badly things can go wrong if misguided policies, like the ones we're following now, are adopted. I thought we learned these lessons? Didn't we? We know what happens with these types of policies similar ones have been tried before and yielded conclusive evidence that they don't work. I believe that before it's all said and done, these policies will dwarf the 1970's in terms of catastrophe. If what doesn't work isn't already clear, it will be.

History takes time to work ideas out. People and old ideas about utopia die hard. There are still people who actually call themselves Communists, even now after all that we now know about how intellectually bankrupt it is. I still believe that people retain a bit of common sense. There's always a balance between philosophical and moral vision and pragmatism. When a vision is bad it eventually makes that clear as it plays out in real time. We are seeing one playing right now. I wouldn't prefer to have to demonstrate the stupidity of current political liberalism. But at least future generations will learn what not to do. All is not lost.

From what I've read from Mr. Singer, he tends to state a problem narrowly with a kind of conundrum and proceeds to argue that we really have no option but to follow the logic he puts forth. It's just that obvious!

It does bring up a point that bothers me about healthcare economics though. The fundamental problems with the current healthcare scheme is that the people who use it don't generally pay the fair value for it. Healthcare is an economic good. If you care about receiving a quality product you should be willing to pay for it. It's like that in any market. The irony of the current socialize medicine approach is that it is going to create a side market for cash paying customers. This is going to divert doctors towards serving those who can pay and away from those who can't. The level of quality care that the poor are probably going to receive is going to remain low and soon the middle class will be joining them in this. The rich, if they pay cash, will certainly be served in an environment where the government increasingly squeezes doctors to get "savings".

Since the advent of copays and HMOs, you could argue that healthcare already is run in a socialist model. The only difference is that now the government will be the arbiter of services rather than the insurance companies. You will soon be trading one master for another. And as bad as insurance may be, they do have some form of a bottom line, and some incentives for doctors who, via insurance networks, have in some form become employees of insurance companies. I can't imagine that government will do a better job. So, the horror stories about how insurance did a victim wrong on the commercials advocating for Obama's plan are only going to increase and get worse.

In the end, this debate must entirely be recast. We can offer some form of assistance in providing this service. But it is and has always been unsustainable to expect the usage of the product to be essentially separate from the payment of the service. This is the general case in the health insurance market. Until it is fixed, there is no way healthcare costs can reasonably be expected to come under control. Government will only expand it an accelarating rate. The current insurance market already demonstrates that its costs are unsustainable though less than what we will see with socialized medicine. We have to price the good accordingly and have people pay for it. This will economize on its use and abuse.

We also have to do away with trial lawyers. But that's for another day and another President to deal with later along the road who will have to clean this up and probably start over with it.

Yesterday I saw a "man on the street" interview with a guy in New York. The guy said he supports the idea of offering healthcare and that the "rich" should pay for it. But, he believes the tax flogging should be only for people making over $500K and not just $350K like he an his wife. Because - you know - after childcare, the mortgage, the cars, private school tuition, restaurants, fitness club dues, weekly house cleaners, and everything else, there's just not a lot left over. I laughed out loud at that one.

The interview illustrates how we have become a nation that feels compelled to care about problems in a politically correct way but of course we don't want to sacrifice anything for the stupid PC policies. It should be the "richer than me" who sacrifice. Maybe Americans really are stupid and in need of enlightened bureaucrats to tell them where to go and what to do. I just don't know anymore.

Wednesday, July 15, 2009

The Democrats in Congress are ready for action on healthcare:------------------"House Democrats on Tuesday unveiled sweeping health-care legislation that would hit all but the smallest businesses with a penalty equal to 8% of payroll if they fail to provide health insurance to workers. The House bill, which also would impose new taxes on the wealthy estimated to bring in more than $544 billion over a decade, came as lawmakers in the Senate raced against a self-imposed deadline of this week to introduce a bill in time for action this summer."------------------The article doesn't mention the other proposal to charge a surtax of 5.4% on anybody making one million annually. That's in addition to their regular federal and state income tax, which at those marginal levels, are also going to rise to around 40%. So, if you're a millionaire this really sucks.

I suppose that among Democrats the easy stereotype of a millionaire is the fatcat guy on the Monopoly board game. Or maybe, Richie Rich or Gordon Gekko. Who knows? The reality is that most of your millionaires are fairly normal people. Books like "the millionaire mind" are intended to encourage others to gain wealth over their lifetime. They show that your average, stereotype millionaire is someone who earned it starting a business and has certain personal character traits such as thrift, consistency, and commitment to their business. They are generally pretty admirable traits. They are often church members. In addition, these people are not the ones wearing suits around downtown throughout the week. They are folks who have multi-employee plumbing, home repair, a retail business and many have businesses that you wouldn't have heard of or even think of because a lot of them are specialty, niche types of businesses that they did well in. These are America's sugar daddies.

It is estimated that in the current environment anywhere from 40% to 60% of Americans do not pay any federal income taxes at all. This is not a representative government when all people don't have some "skin in the game" and pay at least something for the bigger government services they receive. A country can't prosper when fewer and fewer of the rich pay for everybody else. Right now upper income Americans earning over $250K annually pay the vast majority of federal taxes. This is unsustainable. It makes those who don't pay taxes, yet receive disproportionate benefits, wards of the state.

Taxing these small businesses is a surefire way to kill an economic recovery. These people will respond to higher operating costs by way of a surtax and/or payroll tax by laying off workers or raising prices to end customers. Neither is a good option in a competitive market.

I really don't understand Obama's policies. It would behoove anybody with access to the man to please give him an education on how an economy works. More importantly somebody needs to whisper that we will never have a heaven on earth. History is paved with tales of dreamers whose dreams were shattered against the reality of human nature within a sinful world.

Tuesday, July 14, 2009

First, President Obama proposed $12 BILLION more in spending for community colleges today. I guess I should be encouraged because in this regime $12B is chump change.

Second, he said the following:

"The president said the creation of jobs that pay good wages is the "single biggest challenge" in the recovery for the U.S. and governments worldwide. He defended his multi-pronged agenda of trying to revamp health care, energy, science innovation and infrastructure as the key to real economic growth."Those foundations are so critical because we've got to find new models of economic growth," Obama said."

We have hundreds of years of knowledge about what spurs economic growth. The basic thrust of what it takes is to encourage risk taking and entreneurship, defend property rights and the rule of law, provide incentives via tax policies, do not enact trade barriers, do not protect pet industries, and allow for the inherent "creative destruction" of capitalism to run its course. If by "new models" Obama means hire union labor to do public works (infrastructure), socialize medicine (healthcare), or adopt energy policies that are high cost (energy), than he will be very frustrated in his endeavors to spur real economic growth. He was somewhat on target with his recognition of the importance of science innovation if he's referring to technology adoption as a means to improve economic standards of living.

There is nothing new about what Obama is proposing unless your young and learning about this stuff for the first time. Keep learning and reading. You'll actually find that Obama's proposals mirror recycled policies that didn't work in the 1930's, 1970's and at periods in the 1800's.

Friday, July 10, 2009

At some point this dude has to stop blaming Bush and repeating the falsehood that he inherited disaster but its a big ship we're trying to turn around so it will take more and more time. It is July 10. When does Obama take responsibility for his own detrimental actions?

Ugh, I spend so much time writing on this blog about this stuff. These policies and these statements keep drawing me back in. I predict this man will go down as one of the worst presidents in American history. He is not a leader and he doesn't take genuine responsibility for his actions. He has Congress write major legislation he just blames Bush and makes excuses. In the article he mentions he wants a major healthcare overhaul by August! Shouldn't we think about this? I am not sure when the excuses start to stink for the rest of my countrymen. I guess they are more patient than I.

Obama won with 52% of the vote in November over an old man with no base support and after 8 years of GW Bush and in the midst of a bank crisis that could not have been better timed for him. It's a win. But it's not a mandate for radical, sweeping change where he no longer has to persuade. He is governing as though he just has to now implement the will of all the people, as though he won 65% to 70% of the vote. He is overplaying his hand.

Thursday, July 9, 2009

According to the American Hospital Association there are 5,708 registered hospitals in America http://www.aha.org/aha/resource-center/Statistics-and-Studies/fast-facts.html. The Census Bureau estimates there may be up to 7,500 depending on how they are counted. The president proposed to cut reimbursement to these institutions by $155 billion over 10 years to save money on his socializing medicine plan. These hospitals will see a net decrease on this amount assuming everything else stays equal.

Simple arithmetic shows that $155B divided by 5,708 hospitals results in a cut in reimbursements results in them losing $27,154,870 in revenue on average during the next 10 years. Divided by 10, holding the dollars constant, this results in an annual cut of $2.715 million per hospital. This would seem to be a fairly steep cut. To absorb it a single hospital has a few options:

1. If an average full-time nurse earns $60,000 per year, they can layoff about 45 nurses per hospital from the budget.

2. If an average doctor earns $250K per year, they can layoff about 11 doctors per hospital.

3. If an average hospital profession position employee earns $80K per year, they can layoff about 34 of them per hospital.

4. If an average admin assistant or receptionist earns $40K they can layoff about 68 of them.

5. They can deduct it from their IT budget, they can reduce the amount of equipment such as new stethoscopes, or the amount of supplies such as gauze or whatever else.

6. Rather than cut, they can increase fees for hospital parking or on other services along those lines. Maybe charge everyone who parks $10 per car to recoup the loss of $2.7M annually.

7. Perhaps offer new services that generate additional revenue. This could be anything for which a private party is willing to pay in cash. The problem with this is that these services may divert the doctors to doing activities that generate new revenue for the hospital and away from the new patients who walk in the doors. Maybe the interns can take care of the non-paying, non-revenue generating customers.

They will likely combine these items and cut in several areas. It can't really be doctors who get cut. They will actually be in short supply since there is no way the existing number of doctors can adequately provide services once the floodgate of patients come in. It will probably not be as many nurses either since there is a shortage of nurses. It will likely be administrative staff. Cutting admin staff is potentially problematic because they are the ones responsible to ensure bills get paid and there is no fraud associated with the new program.

It is unclear how hospitals can improve the quality of service by cutting staff or how much they can raise revenue by imposing new fees. In any event, how any group involved in providing healthcare services can be for these cuts is mind boggling to me. It also defies common sense as Obama urges that his policy will improve the quality of care. The funny numbers he's proposed just don't make a whole lot of sense. No surprise there.

Looks like Robin Hood economics is back. The democrats are planning to tax the rich to pay for a cool trillion in government healthcare expansion. One representative is quoted as saying taxing the rich is better than nickling and diming everyone else who has no money to take.

At this point, I just throw my hands up!

Who is "rich"? Is it $250K or above? How much are you going to tax them? Is there concern this may lead to a relative decline in investment since they have the resources to save and invest in enterprises that may cause jobs? Are there enough rich people to tax to come up with over a trillion in ten years? Might this cause further disincentives for future recipients of government health services to economize on it since those who are receiving the care don't pay for it, they have no "skin in the game"? If you simply confiscated all the homes and all the wealth from folks in Greenwich, CT; McClean, VA; Beverly Hills, CA; Palo Alto, CA or other cities where the people have cash, would they still have enough? Are they planning, perhaps, to install prison terms for anybody with an annual income of $1 million?

Would that make liberals feel better? The way the democrats are going about addressing income inequality is to bring the rich down, not to bring the poor up. Is that really the best approach and what this country wants?

Wednesday, July 8, 2009

At the end of the article in my previous post about hospitals, GOP leader John Boehner says:

House Republican Leader John Boehner of Ohio criticized the hospital deal, saying it was negotiated out of public view. "The administration and congressional Democrats are literally bullying health care groups into cutting back-room deals to fund a government takeover of health care," Boehner said in a statement.

As bad as Obama is, the Republicans, with comments like this, do not inspire confidence. I have a sad feeling that they prefer to speak stupidly and in generalities rather than to articulate exactly what the damage will be of this proposal. Get into the stark facts about level of service cuts, the impacts this may have on certain types of care, give human examples that people can relate to, and hammer it home that the President and his party are spending like drunken sailors on shore leave. Instead, Boehner hits the conspiracy theory theme. Oh no - backroom deals! The stupidity of these policies are so apparent the opposition arguments should essentially write themselves. But I guess that's too much to ask from current Republicans.

Hospitals are willing to give up an estimated $150 BILLION in future payments to defer to the "crisis" in healthcare that socializing it will apparently solve. Now I know that when the standard jargon for budgets now includes the word trillion, we aren't as phased by a mere $150 billion. But how hospitals can operate by accepting that much less in revenue is truly puzzling. I presume the only way to do that is to cut operating costs. To cut operating costs, you can layoff staff or simply reduce the services. I didn't know hospitals were in such a plush position from a cash standpoint that they can take a hit of this magnitude. I've noticed that many hospitals, especially in inner cities, have closed in recent years.

I suppose the idea now if just to accept anything and figure out the details later. If I were a hospital employee or future patient (which I certainly will be at some point), I would be concerned.

Tuesday, July 7, 2009

Mike was da man during his day. It was all good from the Jackson 5 days to Off the Wall to Thriller. I thought his late 80's and 90's stuff was even better for my tastes given that I never had much groove.

But today's media coverage was ridiculous. Celebrites came out of the woodwork and who knows if they even knew the guy in some of the cases. I mean Al Sharpton speaking at the service? Dude, if that guy's the best you can get up there, I have to question how deep these friendships really ran. Tomorrow will come and the Mike story will go to the tape and housed in the storage closet. We'll move on to better stuff like Lindsay Lohan's partying or Jen Aniston's new boyfriend. It's all good.

So what's the relationship between these two seemingly disconnected news stories? The Obama economists believe that if they can pump enough debt financed money into the economy, people will consume again. Apparently, liberals love consumerism now. Since people are saving rather than buying this is having a negative impact on businesses who respond by laying off their workers.

Increased savings is part of a normal contraction that needs to occur in this country. Americans have way too much debt. There is no magic formula in a second "stimulus" that will finally end American's new found spending habits and spur them to buy stuff. Rather, this will likely end up with little effect. From an economic perspective, it will only serve to actually decrease total national saving and increase overall debt because any private saving that will add to the capital stock will be more than offset by the negative savings occuring by government via the massive debt. This is a long-term problem economically.

This is yet another example where patience on the part of our leaders is called for. Instead we have them arguing for action and for policies that defy common sense for anybody outside of left-wing academic economists who are not the mainstream even in their own profession. I suppose president Obama has not yet decided to go through with it. Let's hope that he doesn't. You can probably guess that I am not hopeful about the man's judgment and basic leadership instincts. My guess is that when the next unemployment numbers come out in early August, he will go forward with another trillion dollar government spending pork bill.

Men who seek to change the world often do so in ways they didn't intend. Let's hope, for the good of this country, that he learns moderation and a sense of proportion at some point during his presidency.

Sunday, July 5, 2009

It's reported that White House economists and President Obama are thinking about a second wave of "Stimulus". The first gamble worked so well. Why not double down? If stimulus works so well than why don't we just do it as a matter of routine economic policy? Do you remember the 1.5 multiplier that was promised? That's the one where it was suggested for every government "Stimulus" dollar thrown out we would get a 1.5 that amount in return due to all the extra shopping and consuming that would occur. It's July. The "Stimulus" was passed in February. How is that working?

Many of my earlier posts when Obama was hatching these policies were written out of the horror of the policies I was watching become law. Things have not really changed. Obama's economists suggest they're willing to do "whatever it takes" to get the economy going again. Ok. Mr. Obama, here's what it will take:

1. Cease the crazy government expansionist policies such as healthcare, cap and trade, etc. They create uncertainty because nobody in business with money to invest knows the details. This hurts business planning in certain major industries.

2. Stop the daily barrage of radical government expansion proposals including financial regulations that you've proposed.

3. Don't denigrate capitalism with such terms as the "system failed". Certain things didn't work well such as subprime mortgages and a lack of regulation in derivative markets. Don't denigrate the other stuff becuase they weren't the root of the problem. Don't scare entrepreneurs into thinking you're a literal European Socialist.

4. Cut taxes and cut government spending. You're doing the opposite. government spending has lags, tax cuts help quickly and are easier to administer.

5. Be a leader and don't let Congress write your legislation. This is under-reported but Congress is writing these major bills. Usually the administration would lead on such issues. But with Obama it's the democrats in Congress. That's not good given how liberal those people are. The result is that the bills get passed but they end up incoherent and laced with special interest loopholes that undermine the overall intent of the policy. This makes already bad stuff even worse.

6. Defer to business leaders. I know this has to be hard for a guy like Obama. But the truth is that you need them since they are the people whose companies do the hiring. They know a lot more about business than you do. Give them the tools they need beyond just empty platitudes that you will reduce their healthcare costs by starting the process of socializing medicine. Generally, they're not stupid people. They know that doesn't make sense. Listen to them and give transparency. You have a different role. You don't create jobs, businesspeople and entrepreneurs do.

Friday, July 3, 2009

In a Wall Street Journal article there was mention that the "Christian left" is emerging as a potent force to worry about global warming. http://online.wsj.com/article/SB124657726311989209.html The idea is that we have to be good stewards of God's creation. The Christian right doesn't like it because they say global warming is hype and that to counter it we will end up crippling the economy and, thus, the poor.

This discussion reminds me of a saying by the Simpson's own Comic Book Guy: "I'll take a hundred cheeseburgers. Ooh, loneliness and cheeseburgers are a deadly mix."

This whole idea of having a distinctly "Christian" view of political issues disturbs me. There are clearly some obvious things such as abortion, gay marriage, etc. that are immoral and anti-Biblical. Beyond that it is never easy to state that tax cuts or tax increases are bibilical or anti-biblical. Usually poverty is thrown out by liberal Christians as the thing Jesus talks most about. Therefore, we apparently need to have big government welfare programs to help the poor. While that's not what Jesus advocated, it's what we moderns should do if we Christians care for the poor. On the other end, I once heard James Dobson argue that the marriage tax penalty was awful and that Christians should be against it. I found this to be bizarre reasoning because the marriage tax penalty only hits if you have two spouses working. If you have only one and the other stays at home to care for the kids, the tax code actually offers a marriage tax benefit since filing as a household has lower marginal tax rates than filing as a non-married person. Did he think this through? Is Focus on the Family all for having two working spouses with the kids in daycare?

Anyway, I am Christian. I take my faith seriously. My faith informs my opinions but I like to think that the reasons I give for my opinions stand on their own merits and not because as a Christian I am supposed to think in a certain way. I wish Christians of all stripes would just think through issues, state their opinions, and not hide behind the banner of group think where they blithely assert that their opinion is essentially what any good Christian should think.

Thursday, July 2, 2009

This man named Nassim Taleb is arguing on CNBC that the massive amount of debt relative to actual equity is going to create a massive financial crisis down the road for the U.S.http://www.cnbc.com/id/31706523

Mr. Taleb is the author of a somewhat famous book in certain quarters called "The Black Swan." I can't say that from a straightforward perspective he is entirely wrong. I have within the last year come to believe that from a personal standpoint, paying down my own debt is job number one. But I think he overstates and oversimplifies the problems. There is good and bad debt and there is a lifecycle over which you pay it down. If the owners of your debt called in the chips in too short a timeframe, he would be absolutely correct and I and millions of others would be basically in deep, deep trouble. The question is one of timing and of arbitrarily determing at what point does all this debt reach a critical mass in a national economy where so many people teeter into this position that it becomes a drain on everybody.

Debt is not inherently bad if it is incurred to acquire an asset that has a reasonable prospect of yielding a future return on the investment for which the debt was incurred. Going into debt to invest is not bad. It could be though if all the assets go bad and you lose your job and you can't keep up with the debt payments. In this scenario you still have to pay the debt and the assets you have will not cover it. For example, if you own a home where you owe more than you can sell it for because home prices have gone down by so much and plan to sell it to cover debt, you will find yourself with some serious problems. You'll still have the original debt you had plus the debt to pay off the balance on the home.

Nonetheless, it is hard for me to believe that lenders will call their debt because it is in their self interest that you pay it back according to the negotiated terms of the agreement. It's also hard to believe that this country will go so far down as to realize this doomsday scenario. As bad the unemployment numbers are, we're not at 20% to 40% of people not working. There are still far more people gainfully employed than unemployed. With respect to credit card debt though, I wholeheartedly agree with his premise. I also generally agree that Americans are in way too much debt and the government with all its spending, er... "stimulus" and future liabilities for spending is in even worse shape. Obama's even making that worse with all of the crazy policies. So while this is a bit too much gloom and doom even for me. It's worth keeping mind.

It also reinforces that if you are in debt right now, paying it down should be one of your absolutely highest priorities in life. The old proverb that debt is slavery should not be forgotten. Your debt builds your lenders wealth more often than your own.

It came out yesterday that Walmart is all for a government mandate requiring businesses to provide healthcare to workers or pay a tax if they don't. Why would Walmart and other big businesses support this? No doubt it is because they are good citizens who care and trust the government right?

Actually, they like it because it adds significant operating costs for their smaller sometimes "mom and pop" competitors. Since 99% of large companies already offer insurance it's not a big deal to them.

Currently, mom and pops can get away with hiring part-timers without incurring the cost of offering them health insurance. Part-timers could be anyone from high school kids to temp workers making, say, between $8 and $12 an hour. Depending on how the law mandating that these small employers offer coverage is written and who is exempt, the cost of hiring these employees could go up significantly. This cost would of course have to be passed on to consumers in the form of higher prices for the goods they sell. This would make them even less competitive on prices with Walmart. If the law exempts business with less than 10 employees, for example, or some other arbitrary threshold it means the companies who can't downsize to that level will feel the pain. So you'll have mega retailers and very small retailers and those in the middle will be in a no mans land because they'll have to increase prices relative to the behemoths and the very small. As their prices go up, Walmart, with its everyday low prices looks even better. Goodbye Mom and Pop. Hello Walmart.

Yet another unintended consequence of Obama's policies. Onward and upward I say.